NPCI Defers UPI Payment Charges Until After Diwali, Prioritising Digital Payment Stability

India’s digital payments ecosystem is in focus following reports that the National Payments Corporation of India (NPCI) has deferred the proposed implementation of charges on UPI payments until after Diwali. The reported decision postpones a change that was expected to take effect from October 15, providing additional time for clarity on the proposed fee structure and its implications for digital transactions.
According to the NPCI announcement on October 13, the revised implementation date will be notified separately. The proposed Merchant Discount Rate (MDR) was originally scheduled to take effect on October 15.

What the Proposed Framework Means

Under the proposed structure, a 0.4% MDR would apply to eligible person-to-merchant (P2M) UPI transactions exceeding ₹2,000, subject to a maximum charge of ₹300 per transaction. Person-to-person transfers and merchant payments of ₹2,000 or less are excluded under the reported framework. Eligible small merchants are also exempt.
MDR is a fee paid by merchants to payment-processing institutions for facilitating digital transactions. It is not a universal charge on every UPI transfer, and the proposed fee is intended to be borne by eligible merchants rather than directly charged to consumers. The framework has nevertheless raised concerns about operating costs and the possibility of businesses passing additional expenses to customers through higher prices.

Governance and Economic Implications

The deferment highlights the challenge of balancing digital payment infrastructure funding with affordability and ease of doing business. The festive season typically brings higher retail activity, making transaction costs particularly significant for merchants and small businesses. Trade bodies had raised concerns about introducing the levy during this period.

From a governance perspective, the postponement provides additional time for payment providers, banks and merchants to prepare for implementation. It also underscores the importance of transparent fee rules, clear communication and safeguards against additional costs being transferred to consumers.

The key takeaway
NPCI has postponed the proposed MDR rollout until after Diwali; it has not cancelled the framework. The revised implementation date remains to be announced.